Law: Wealth Tax Act, 1957

Section: 18(1)(c),68

Wealth tax-- ----Penalty---Concealment of wealth---Amount deemed to be undisclosed income under provisions of, Income-tax Act---Liability of income-tax and penalty on such amount should be taken into account while including undisclosed income in net wealth of assessee---Net wealth after such adjustment below taxable minimum---Penalty could not be levied---Indian Wealth Tax Act, 1957, S.18(1)(c). If a deemed income is to be included in net wealth, only the net sum after adjusting the liability attached will make its net value includible in taxable wealth. During the previous year relevant to the assessment year 1972-73 the assessee was found in possession of a sum of Rs.1,35,000. In his return of income, the assessee had shown Rs.1,35,000 as borrowings in Part III of the return. The assessee's explanation as to source of this borrowing was not found acceptable and the amount was deemed to be income of the assessee from undisclosed sources under the Income-tax Act for the assessment year 1972-73. Penalty proceedings were also initiated and penalties were levied. However, the Tribunal cancelled the penalty. The sum of Rs.1,35,000 was treated as part of the wealth owned by the assessee on the valuation date for the assessment years 1972-73 and 1973-74 successively and was added to the net wealth of the assessee, and for each year penalty for non-disclosure of such amount was levied. The Appellate Assistt3nt Commissioner and the Tribunal held that penalty could not be levied. On a reference: Held, that if the amount alleged to be a borrowing were held to be income of the assessee of the relevant year, it carried with it liability to pay tax and penalty thereon under the Income-tax Act and such liability was relatable to the end of the previous year relevant to the assessment year. That was the valuation date for the purpose of wealth tax. It was admitted that if the liability arising under the Income-tax Act in relation to the assessment years in question were adjusted against the value of assets, the assessee would not be left with taxable wealth at all. Hence, penalty could not be levied. JUDGMENT At the instance of the Commissioner of Wealth Tax, the following…

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